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September 25, 2009

Twitter Nears $100 Million Mark In Funding

by Sam Savage

Twitter is nearing $100 million in new funding with a deal that values the micro-blogging phenomena at one billion dollars, The Wall Street Journal reported Thursday.

New capital will be provided by mutual fund giant T. Rowe Price, private equity firm Insight Venture Partners and five other investors. Other investors joining the list include existing Twitter backers Spark Capital and Institutional Venture Partners, the Journal said, citing people familiar with the deal.

The amount is double what Twitter expected to get in its latest round of fundraising, and if the deal goes through, it would highlight the increased interest that investors have in the upstart company.

Twitter has become all the rage in the cyber-community, as it allows users to engage in social networking through a constant stream of 140-character blogs, or "Ëtweets', displayed on the author's profile page and sent to the author's subscribers who are known as followers.

With the involvement of T. Rowe Price, a mutual fund known more for investments in public companies than in start-ups, got many people talking about the possibility that Twitter may eventually become a public offering or acquisition.

"You only see this type of behavior typically when a fund is seeking to get a position before an IPO," said Brigantine Advisors analyst Colin Gillis.

In its 3-years of operation, Twitter has added 44.5 million people to its site as of June. This is 15-fold what it was just one year before, according to data from comScore. But the San Francisco-based company is only getting started with its focus on making money from the free service.

Earlier this week, Co-founder of Twitter Biz Stone told Reuters that while premium features and advertisement are a key part of making money, Twitter still has no plans of including advertisements on the site this year.

Jeff Lindsay, an analyst with Sanford Bernstein, said that most assume that Twitter will be bought eventually. He listed Google Inc, Yahoo Inc and Time Warner Inc's AOL as potential buyers.

"Anybody who is taking a position like that is taking a bet that either they (Twitter) find a business model -- which they haven't yet -- or more likely that someone with a lot of money burning a hole in their pocket will buy them," Lindsay said.

While Twitter did not return calls for comment, the company did previously state that it has every intention of remaining independent.

After a February round of funding, led by Institutional Venture Partners and Benchmark Capital, Twitter was valued at around $250 million. Together, they joined to invest $35 million in Twitter during that round.